Correlation Between CERo Therapeutics and Parker Hannifin

Can any of the company-specific risk be diversified away by investing in both CERo Therapeutics and Parker Hannifin at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining CERo Therapeutics and Parker Hannifin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CERo Therapeutics Holdings and Parker Hannifin, you can compare the effects of market volatilities on CERo Therapeutics and Parker Hannifin and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in CERo Therapeutics with a short position of Parker Hannifin. Check out your portfolio center. Please also check ongoing floating volatility patterns of CERo Therapeutics and Parker Hannifin.

Diversification Opportunities for CERo Therapeutics and Parker Hannifin

0.54

Correlation Coefficient

CERo Therapeutics  Parker Hannifin

Very weak diversification

The 3 months correlation between CERo and Parker is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding CERo Therapeutics Holdings and Parker Hannifin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parker Hannifin and CERo Therapeutics is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on CERo Therapeutics Holdings are associated (or correlated) with Parker Hannifin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parker Hannifin has no effect on the direction of CERo Therapeutics i.e., CERo Therapeutics and Parker Hannifin go up and down completely randomly.

Pair Corralation between CERo Therapeutics and Parker Hannifin

Assuming the 90 days horizon CERo Therapeutics Holdings is expected to generate 17.37 times more return on investment than Parker Hannifin. However, CERo Therapeutics is 17.37 times more volatile than Parker Hannifin. It trades about 0.3 of its potential returns per unit of risk. Parker Hannifin is currently generating about 0.19 per unit of risk. If you would invest  0.74  in CERo Therapeutics Holdings on October 22, 2024 and sell it today you would earn a total of  0.80  from holding CERo Therapeutics Holdings or generate 108.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

CERo Therapeutics Holdings  vs.  Parker Hannifin

CERo Therapeutics

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CERo Therapeutics Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CERo Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Parker Hannifin

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal technical indicators, Parker Hannifin may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CERo Therapeutics and Parker Hannifin

The main advantage of trading using opposite CERo Therapeutics and Parker Hannifin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CERo Therapeutics position performs unexpectedly, Parker Hannifin can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Parker Hannifin will offset losses from the drop in Parker Hannifin's long position.

The idea behind CERo Therapeutics Holdings and Parker Hannifin pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.